Employer Use of Financial Incentives to Reward Healthy Behavior Expected To Surge

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Companies Tailor Programs to Target Specific Actions, According to Watson

Wyatt

WASHINGTON, May 29 /PRNewswire-FirstCall/ -- The number of employers
offering workers financial incentives to better manage their health is
expected to jump sharply next year, according to a survey by Watson Wyatt
Worldwide, a leading global consulting firm, and the National Business
Group on Health, a national nonprofit association of large employers.

The survey of 453 large employers found that half currently use
incentives to encourage their workers to participate in health improvement
activities, such as smoking cessation or weight management programs. By
2009, however, that number is expected to leap to 74 percent.

"Some employees need a little extra inspiration to address their own
health and develop healthy habits," said Ted Nussbaum, Watson Wyatt's
director of group and health care consulting in North America. "Financial
incentives can be a valuable investment that provides that essential push.
And the payoff from improved workforce health and productivity cannot be
overstated."

According to the survey, employers are using a wide range of financial
incentives to promote healthier lifestyles -- from completing health risk
appraisals to participating in health improvement and disease management
programs. While the vast majority of employers are rewarding healthy
lifestyles, 6 percent are penalizing employees for poorly managing their
health conditions.

Companies use financial incentives to encourage a healthier lifestyle

Employers offering financial

Employee action/behavior incentive (%)

Full coverage of preventive services 53%

Completion of health risk appraisal 53%

Participation in health improvement or

disease management program 42%

Participation in smoking cessation program 40%

Participation in weight management program 31%

Management of cholesterol level, blood pressure 21%

Completion of consumer education module 12%

Maintaining a personal health record 7%

Employers use cash or an equivalent reward most frequently as an
incentive for participating in health engagement activities. However, some
employers now tailor their programs, matching desired rewards with a
specific behavior or activity. For example, premium or deductible credits
are more effective than cash at boosting health risk appraisal (HRA)
participation. Seventy-three percent of companies that offer premium
credits and 67 percent that offer deductible credits have at least half of
their workforce enrolled in an HRA compared with 17 percent that offer cash
and 12 percent that offer no incentive.

"Companies are targeting specific results with incentives that align
with their business goals and matter most to their workers," said Bruce
Kelley, senior group and health care consultant at Watson Wyatt. "For these
types of rewards to be effective, it's a matter of tailoring the incentive
to the desired behavior and ensuring that employees are more involved in
the process."

"A second generation of incentive programs that rewards a new range of
health care choices such as selecting high-quality doctors and providers is
around the corner," said Nussbaum. "Employers view this as a big picture.
They realize the broad power of targeted incentives in building a healthier
and more productive workforce."

Watson Wyatt (NYSE, Nasdaq: WW) is the trusted business partner to the
world's leading organizations on people and financial issues. The firm's
global services include: managing the cost and effectiveness of employee
benefit programs; developing attraction, retention and reward strategies;
advising pension plan sponsors and other institutions on optimal investment
strategies; providing strategic and financial advice to insurance and
financial services companies; and delivering related technology,
outsourcing and data services. Watson Wyatt has 7,000 associates in 32
countries and is located on the Web at http://www.watsonwyatt.com.

About the National Business Group on Health

The National Business Group on Health is the nation's only nonprofit
organization devoted exclusively to representing large employers'
perspective on national health policy issues and providing practical
solutions to its members' most important health care and benefits related
issues. Business Group members, primarily FORTUNE 500 companies and large
public sector employers, include the nation's most innovative health care
purchasers who provide health coverage for more than 55 million U.S.
workers, retirees and their families. The Business Group fosters the
development of a safe, high- quality health care delivery system, works to
achieve transparency and make scientific evidence of effectiveness the
standard for care, and shares best practices in health benefits, health and
productivity, related paid time off and work balance issues. For more
information about the NBGH, visit http://www.businessgrouphealth.org.

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